Does Suncor have an ‘obligation’ to release results of its offer for Canadian Oil Sands?

On the first day of trading after Suncor failed to receive enough shareholder support for its bid to take over Canadian Oil Sands, the hunted turned hunter: COS says Suncor has an “obligation to disclose material facts” on its bid.

In particular, COS wants to know how many shareholders tendered stock, or how much support Suncor received. There is talk that the number is around 40 per cent, which is a long way from the 66-2/3 per cent condition imposed by Suncor. The bid offer has now been extended to Jan. 27.

Clay Horner, a member of the team at Oslers, the law firm acting for COS, said “our position is that they are required to make that disclosure and that they were required to make it before the markets opened on Monday.”

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He said the information was material for anyone trading in COS stock on Monday, including investors currently holding shares. If the number was low, for example, shareholders may make a different decision than if the percentage was high.

“Our reason [why Suncor needs to do this] comes from the materiality of the information to people who have to make a tender decision,” Horner said.

He argued that how close the bid came to succeeding is information investors most want to know, once the matter of whether there has been a change in bid terms has been answered. “Ask anybody and they will tell you that this is important information. It’s a matter of fairness,” even if its not a “form requirement,” in Canada.

The need to disclose results – which Horner said is a requirement in a U.S. domestic takeover – flows from the many statements or intentions made by Suncor that have been changed after the fact.

“Those statements have created expectations on people’s part that ought to be answered,” he said, referring to Suncor’s reaction to the poison pill hearing before the Alberta Securities Commission and to the “confidence” of success it expressed last week.

Lawyers for COS argue there is a precedent for its demand that Suncor release the results.

They point to the 2013 battle waged by First Quantum for Inmet Mining. Those offers started in late 2012 and quickly turned hostile. After numerous extensions and variations in March 2013, First Quantum announced the “final variation and extension of offer.” It also announced that “61.45 per cent of Inmet shares (were) tendered to date.”

That support was below the 66-2/3 per cent minimum condition that First Quantum had made as part of its takeover offer. The high level of support obtained led to a fast response by the holdouts: Within 10 days support had reached 85.5 per cent and within three weeks more than 97 per cent of the shares had been tendered.

Seymour Schulich, who owns about five per cent of COS and is a vocal opponent of the transaction said Suncor should either “raise the offer or go home.”

In a release Monday, Suncor noted it was “encouraged” by the number of shares tendered, adding it believes “strongly in the value of the offer for COS shareholders.” It said it’s decided to “extend the offer in order to allow shareholders to continue to tender to the offer.” In response to a question of why the percentage hadn’t been disclosed, Suncor said, “there is no obligation to disclose.”